How to start a nonprofit: 12 key steps

Why start a nonprofit?

The first and arguably most important question you should ask yourself before endeavoring to start a new organization is whether or not your cause needs another non-profit. As was mentioned in the introduction, there are a lot of passionate people in the world using their energy to help make things better.

The Evaluation Process

In the same vein, there are also a lot of nonprofits, for instance, in 2013 there were approximately 1.41 million nonprofits registered with the IRS. If your cause has a field crowded with organizations, it might be worth considering whether you will be able to your make nonprofit stand out. What special service can your organization provide? What need can your nonprofit fulfill that isn’t already being met?

Making the final decision

This is the sort of of basic question that successful business people ask before entering into a market as well. If there’s already a plethora of well-established organizations in the area about which you are passionate, you might consider contributing in other ways, as a fundraiser, donor, or in some other volunteer capacity. If you do your research and find that a new organization is necessary and vital, then it’s time to move onto the planning stage.

Do you have a plan?

Though your nonprofit is going to be set up with the purpose of making the world a better place, you would be wise to take some tips from the for-profit sector on how to run an efficient organization. A good place to start is with a business plan.

Having a document which clearly states your organization’s goals, funding sources and leadership will be key. It will separate your organization from less professional ones, while also providing a sense of clarity and authority for your volunteers, employees and potential donors.

Do You Know Your State Rules on Incorporation?

Have a clear plan.

Another advantage of having a clearly stated plan is that it makes this next stage easier to wrangle. Before you can file for tax exempt status you must first incorporate. Deciding on a state to file in will depend on the needs of your organization, and the cost and requirements of that particular state. For instance Delaware is well known for having the cheapest incorporation fees.

Know your regulations.

The regulations for this process vary greatly by state. The website Bizfilings provides a good overview of different states’ requirements. You’ll need to do things like draft articles of incorporation and meet with your board of directors. Incorporating is the first step before you can move onto the process of obtaining your nonprofit tax exempt status.

How Are You Going To Deal With The IRS?

Know the rules.

After incorporating it’ll be time to have some fun with the IRS. You can read about some of the IRS’s application rules here. The cost of this filling will vary based on your projected revenue, for instance if your income is expected to be less than $57,000, you can file for free online.

File the appropriate forms.

There is also 1023 Form which involves prerequisite questions to ensure that you have all of the information needed to qualify for tax exempt status. The standard fee for filing the 1023 is $850 if your gross receipts exceed $10,000 but only 400 dollars if your gross receipts fall under $10,000.

Don’t lose hope.

Dealing with IRS and receiving your tax exempt status in a timely manner is an absolutely integral step in getting your non-profit started off on the right foot. Good organization, planning and research will be key in this step as you try to get your fledgling nonprofit off the ground.

Are There Other Organizations That Can Help You?

It can be daunting attempting to build an organization from the ground up without any personal guidance. That’s why it’s advisable to reach out to other already established nonprofits, preferably in a related field of interest.

Having guidance from an organization that has already gone this process can be an invaluable resource for any new organization. Having links with other already established organizations will also help you with the establishment of credibility, working on projects or coordinating with other well-known nonprofits is a good way to get your organization positive attention.

What Makes You Unique?

Don’t forget about PR.

Once you’ve obtained your tax exempt status, your legal status as a legitimate nonprofit organization, then you have the difficult task of ensuring that your organization and your cause receive the proper of amount of attention and more importantly the proper amount of funding. Narrative, across all formats, is the most powerful means of communication.

Establish a connection.

Establishing a specific, personal connection with your audience of potential volunteers and donors will be a key factor in how large your organization will be able to grow. If you are starting a non-profit it means that must have an intense passion for your cause, otherwise why go to the trouble of building something from the ground up.

Communicate your narrative.

Communicating your personal story, your life’s narrative and the life narratives of those you want to help is the surest way to attract people to your cause and your organization. If you’ve ever taken a creative writing course, you’ll recognize the term idiosyncratic specificity. What it refers to is the idea that unique, personal details are the one’s that most stand out in people’s mind, that make for interesting, compelling narratives.

When telling your story don’t be afraid to highlight what makes you and your organization unique. Essentially, just make sure you are specific and personal when addressing your audience.

Where Should You Start Building Relationships?

Start local

When building a nonprofit from the ground up, like every new business, it’s best to start by establishing connections locally. Even if you have plans of growing your nonprofit into a massive globe spanning giant, you have to start somewhere.

Make a contribution

Showing that you can be a vital, active partner in improving your local community will go a long way to establishing the credibility of your organization. While it may be tempting to chase large grants or deep-pocketed donors, the core of most successful nonprofits is made from passionate, local volunteers and small time donors.

For an example of how effective small donor fundraising can be, look no further than the presidential campaign of Senator Bernie Sanders, who raised around 139 million dollars, mostly from small donations.

Be passionate

Though 139 million dollars may out of your fundraising range, the number still goes to illustrate the power of taking your message to the streets. Focusing on motivating your base, on building relationships locally, can be a very effective and it’s something that doesn’t require a ton of connections, only passion and hard work.

How Can You Show Your Gratitude?

It’s a simple lesson but one we often forget, being polite and gracious doesn’t cost a dime.

It can very easy for large organizations to lose touch with the people who keep them afloat and the people they aim to serve.

That’s why it is so important to ensure that you keep up with the small details, details like sending personal thank you letters to your volunteers and donors. As mentioned above, it is key for your fledgling organization to establish and maintain local, long-term relationships. A key to that maintenance is properly acknowledging the contributions of those people whose ensure that your nonprofit is reaching its goals.

Especially in the early stages of your organization, personal touches like hand-written thank you notes will leave no doubt as to whether you value your member’s contributions. You also might think about having a newsletter or some other kind of internal publication that can be used to highlight and praise key contributors and volunteers.

Are You Keeping Good Records?

Record keeping sounds boring when considered against topics like how to craft your personal narrative or reach a base of donors but sound filing and record keeping practices have as much to do with building a solid, functional organization as passion and fundraising.

Your organization should be run like any good for-profit business, with a vigilant and precise system to keep track of expenditures, incoming cash, and personnel and donor files as well. Having your records organized efficiently can save money and time, the two most important resources for any organization.

You will want to make sure a maximum amount you organization’s money, time and effort are going towards the cause it was founded to address.

Sound record keeping is really the only practical way to know whether your organization is efficiently applying it assets and that’s what makes it so vital.

Are You Insured Properly?

As your organization grows, so will your risks and responsibilities. One of those responsibilities is obtaining the correct kind of insurance so that your organization is secure against potential lawsuits and other liabilities.

There are many types of insurance your organization should consider having from Directors and Officers/Employment Practices Liability Insurance to Worker’s Compensation and Accident Insurance. As your organization takes in more money, as it employs more people and endeavors to engage in more ambitious projects, its risks will begin to grow as well.

Meeting with an agent who can break down your exposures and costs is also recommended. Having a professional guide you through the process can make it much less daunting and ensure that your nonprofit, its employees and the people it servers are all protected in the event of an unexpected calamity.

When Should You Start Applying For Grants?

Always be evaluating.

As has been discussed, newly formed non-profits often make the mistake of prioritizing large donors and grants over groundroots community participation and donations, but let’s say your organization has been launched successfully, has found support among the locals and is in prime position to expand, how do you know when it’s time to start chasing bigger fish?

First you need to assess your mission statement, ensuring that that your organization has a clear sense of purpose. Ask yourself whether the goals of your nonprofit are specific, compelling and clear. Just as you must create a narrative around yourself in order to attract people to your cause, your organization must have a clear narrative when seeking to attract outside money. You should also frankly evaluate the leadership of your organization.

Demonstrate real results.

You need to be assured that the leadership in place can successfully adjust as your organization grows. New growth and new money sound exciting but they also demand more responsibility, involve more risk and more work. Stability at the top is the key for any organization when going through that sort of transition. The other main aspect of deciding whether your organization is ready to go after large grants is being able to prove that your organization’s efforts and programs have had real, tangible results.

Can you present examples of real good you have done or people you have helped? Being able to prove the effectiveness of your work will be essential in bringing in new grant money. In summation, before you start chasing more money, it would be prudent to make an honest assessment of the efficiency and efficacy of your organization.

What are your long term goals?

Plan for the future.

Once your nonprofit is on solid ground, then it will become necessary to plan for the future to secure the progress that you’ve made. Having a clear plan of succession for instance, in the event that you wish to retire or move on, can assure donors, employees and volunteers that your organization is secure.

Recruit Leadership.

If your nonprofit is being held together only through the strength of your efforts and hard work, then your absence will likely lead to the end of that organization you fought so hard to build. This is a common problem for nearly all business as proper succession management can mean the difference between a company thriving over the long term or ceasing to exist.

Don’t forget about funding.

Making sure that your programs are funded, financially solvent and that the organization does not go lacking for leadership in your absence can transform your organization from a temporary footnote into a lasting legacy. Planning for negative scenarios, for slow downs in donations or loss of personnel, for accidents or lawsuits, sounds like an unpleasant task but it’s also absolutely vital.

Founding a nonprofit can be a daunting and complicated task but with organization, passion and attention to detail, it is possible to create an organization that will help change the world for the better. That’s obviously an opportunity worth investigating and working towards and hopefully the above considerations will guide you well in that process.

Want to get started? See how DonationForce can help your organization start accepting donations immediately.